If the Fed wanted to decrease the money supply, one way to make an enormous impact would be to _______ the reserve requirement, which would _______ the money multiplier.
A) increase; decrease
B) decrease; decrease
C) increase; increase
D) decrease; increase

Question

Quizplus · Accepted Answer

Increasing the reserve requirement decreases the money multiplier because banks have less excess reserves to lend out, thus reducing the overall money supply.

If the Fed Wanted to Decrease the Money Supply, One